The chairman of Westpac’s remuneration committee Craig Dunn told shareholders in the annual report that directors had reduced the ability of three senior executives to realise performance payments during the year.

This was to reflect risk and remediation issues and aspects of business performance not captured by the bank’s complex formula for determining bonus pay.

“The board recognises that Westpac needs to continue to improve the way it prevents, detects and addresses misconduct,” Dunn told shareholders.

“The Royal Commission has highlighted examples of areas where our actions have given rise to poor outcomes for some of our customers.

“This has contributed to a loss of trust and reputational damage to Westpac and the industry.

“The board also recognises that the value of your shares has declined over the year as a result of a range of factors.”

Board chairman Lindsay Maxsted defended the decisions to increase the total pay of most senior executives in 2018, arguing that short term variable rewards of key managers was on average 25 per cent lower than 2017.

“Given the significant reduction in short term variable reward, and no vesting under the long term variable reward, the board feels that 2018 remuneration adequately reflects both performance (on all fronts including financial, customer and risk management) as well as shareholder outcomes,” he told shareholders in the annual report.

Maxsted also tried to downplay the interim findings of the Hayne royal commission, although he conceded that the hearings had delivered important lessons for Westpac.

“The Royal Commission, whilst obviously focusing on matters of extreme importance and interest for financial services companies and regulators, captures only a fraction of the activity taking place inside these institutions,” he told shareholders.

“All four major banks had at various times leading up to the royal commission recognised that certain conduct did not meet legal or regulatory requirements, or had fallen short of community expectations.

“Building on this point, the commissioner commenced his enquiry by asking entities to submit details of conduct over the previous ten years identified as misconduct or conduct that fell below community expectations.

“ These submissions, together with other information gathered, have been subject to scrutiny and informed the themes identified by the commission.

For Westpac, much of this conduct is historical, has been reported to regulators and in many instances, been resolved or is being addressed.”